CHICAGO -- Ohio lawmakers sent a two-year $62 billion operating budget to Gov. John Kasich, who will sign the spending plan into law by Sunday, the first day of the state’s new fiscal year.

Kasich as of Friday had not said what if any items he plans to veto.

The spending plan features what lawmakers say is the largest tax cut in Ohio history, totaling $2.7 billion over three years.

The heart of the tax overhaul is a 10% income-tax cut phased in over three years.

The reduction is still lower than the 20% income tax cut Kasich proposed in February as part of his executive budget.

The General Assembly’s plan also drops Kasich’s proposal to tax oil and gas drillers, expand the state sales tax to services and expand the state Medicaid program as part of the new federal health care law.

The general fund budget totals $61.7 billion, up 10% from the current two-year budget, but down from Kasich’s $63.3 billion proposal.

The two-year all-funds budget totals $120 billion, down from Kasich’s proposed $130 billion.

Last week, ahead of final budget negotiations, state budget officials told lawmakers that the state would see a $397 million surplus by the end of this fiscal year.

Most of that surplus comes from a one-time $500 million infusion into the state’s general fund from the private JobsOhio group, which leased the state’s liquor distribution system last year.

The new budget cuts in half taxes on the first $250,000 of income for small business owners.

The budget also revamps the state’s funding formula for local districts, increasing the amount of per-pupil aid and creating a $250 million fund to reward districts for meeting various criteria. It spends $717 million through 2015 on education than the current budget.

It increases Medicaid spending by $1 billion.

The budget increases the state’s sales tax to 5.75% from 5.5%, and extends the tax to digital products. Kasich had proposed cutting the sales tax to 5% and extending it to a myriad of professional services.

The legislative budget eliminates a state-financed 12.5% property-tax reduction for all new school levies, translating into higher property taxes for homeowners.

A vote on the Medicaid expansion will likely come in September, lawmaker said.

“I am very proud of the work that the legislature has done, alongside our governor to set our state back on course toward long-term growth and prosperity,” House Speaker William Batchelder, R-Medina, said in a statement.

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